Time is running out for couples planning to divorce before new alimony tax rules kick in at the start of 2019. For those in Florida who want to retain the ability to claim alimony payments as tax deductible, there are only a few weeks left to hammer out any remaining divorce issues and get the matter finalized. In many cases, wrapping things up before that date is best for both parties.
Once the new tax rules kick in, the party tasked with making alimony payments will no longer have the ability to utilize a dollar-for-dollar tax deduction based on those payments. That will leave less money for spouses to share, as a sizable chunk will soon go to taxes versus to the other party. Those changes could prompt couples to look for more creative solutions in the years ahead to make up for the lost tax deduction.
Some attorneys predict that the tax change will bring more couples to court. For example, if a couple has a premarital agreement that states that alimony will be capped at $5,000 per month, does that mean $5,000 that could be deducted, or $5,000 under any circumstances? The courts have yet to face these types of challenges.
For those in Florida who plan to bring their marriage to a close, hammering out the details before the end of the year could make a big difference. Having the ability to deduct alimony payments goes a long way toward reducing the paying spouse’s tax obligation. However, time is short to make these important decisions, so spouses must act soon.